Citizens Financial Group (CFG) Morgan Stanley US Financials, Payments & CRE Conference 2024 summary

Strategic initiatives and business performance

• Three-pronged strategy focuses on consumer banking, commercial banking, and private banking, each showing strong momentum and differentiation from peers.

• Consumer bank has improved deposit costs and beta, with New York Metro expansion driving above-average growth and productivity, especially in legacy HSBC and Investors branches.

• Commercial bank offers end-to-end services, leveraging a decade-long partnership with private capital and expanded capabilities through M&A advisory acquisitions.

• Private bank is building a premier, coast-to-coast platform, hiring top teams in San Francisco and Boston, and integrating legacy First Republic talent.

• Significant progress toward targets: $10B AUM, $11B deposits, and $9B loans, with deposit and AUM growth on track and loan growth slower but expected to catch up.

Financial outlook and guidance

• Net interest margin (NIM) expected to improve, with a 40 bps tailwind over the next couple of years, supporting a 16%-18% ROTCE target.

• NIM drivers include balance sheet optimization, deposit cost management, runoff of non-core portfolios and swaps, and accretive contributions from New York Metro and private bank.

• Fee income expected to grow as diversified investments in wealth, capital markets, and payments mature.

• Expense discipline maintained, with GenAI use cases in production and a plan to be 100% cloud-based by end of 2025, yielding cost savings.

• No changes to full-year guidance; NIM likely to exit 2024 above the previously guided 2.85%, with deposit costs expected to be flat to down even without Fed rate cuts.

Deposit, loan, and capital trends

• Deposit growth in New York Metro remains strong, with mid- to high-single-digit year-over-year increases and further runway, especially in legacy Investors branches.

• Private bank and New York Metro investments provide unique mitigants to macro deposit pressures, supporting stable or growing deposit levels.

• Loan growth lighter than expected in traditional middle market and mid-corporate segments due to open debt capital markets and high rates, but private capital and sponsor activity show promise for the second half of 2024.

• Capital return through buybacks continues, with flexibility to increase buybacks if loan growth remains subdued.